Exploring the implications of corporate governance practices and frameworks for large-scale business organisations: A case study on the Kingdom of Saudi Arabia

Abstract

In 2006 the Kingdom of Saudi Arabia (KSA) introduced new legislation related to corporate governance (CG). Initial evaluation by the World Bank three years later showed relatively modest implementation of the regulations. This thesis investigates the extent to which this has been adopted over the past ten years. Saudi business has become more globalized, and a more standardised approach to CG is naturally expected by international partners and investors who must themselves justify investment.. This research expands the existing literature on CG by examining the progress of countries with developing economies and relatively weak or new histories of regulated CG. This thesis explores the extent and form of the uptake of the newest generation of CG regulations, the existing roadblocks and the general current attitudes to corporate governance in KSA, examining the extent of KSA company compliance with KSA corporate governance regulations, the reasons for non-compliance when that exists, and any relevant deficits in the 2006 legislation with respect to international best practice. This is investigated through the use of a series of interviews and surveys with major Saudi organizations, as well as analysis of secondary information. The mixed method approach of quantitative and qualitative data analysis was selected as providing a means to generate both benchmarking data (i.e. quantitative) and further insight as to obstacles for further adoption (i.e. qualitative). As the basis for the investigation, questions are structured around four basic pillars of corporate governance: transparency; stakeholder value; responsibility; and fairness. This linkage of these factors with organisational structure, decision-making and the overall image of the firm within the industry is combined with an examination of how CG affects Saudi business expansion and investments, particularly in relation to how parties from other countries perceive the governance of a company. This perception of governance may condition their views concerning, for example, partnering with and investing in that company. The secondary data relates to The Saudi Arabian Monetary Agency (SAMA), Sanabil Investments and Saudi Arabia Basic Industries Corporation (SABIC). The qualitative data analysis was taken from interviews conducted from fifteen top managers of large-scale organisations. The quantitative data was collected from three organisations: Almarai, Saudi Aramco and Albaik. The overall results of the qualitative analysis and the secondary analysis showed that CG plays a vital role in business development. Quantitative analysis supported the idea that transparency, stakeholder value and corporate image are the main attributes of CG in a Saudi context, with statistical analysis indicating that both are essential to company access to private investment and market liquidity The overall findings indicate KSA’s need to improve its CG standards further, and taht whilst benchmarking of government-supported institutions such as SAMA and SABIC would be of assistance, the KSA government could play a pro-active role in encouraging businesses to expand best international corporate governance practices.